3.1 - Objectives and Strategy

Question 1

Objectives

Answer 1

Statements of specific outcomes that are to be achieved

Question 2

Hierarchy of business objectives

Answer 2

1. Individual
2. Team
3. Functional
4. Corporate
5. Mission

Question 3

Corporate objectives

Answer 3

Objectives that relate to the business as a whole

Question 4

Purpose of corporate objectives

Answer 4

1. Provide strategic focus
2. Measure performance of the firm as a whole
3. Inform decision making

Question 5

Functional objectives

Answer 5

Objectives set for each key business function and are designed to ensure corporate objectives are achieved

Question 6

External influences on corporate objectives and decisions

Answer 6

1. Short termism
2. Economic environment
3. Competitors
4. Social and technological change
5. Political and legal environment

Question 7

Ansoff’s matrix

Answer 7

Marketing planning model that helps a business determine its product and market strategy

Question 8

Features of Ansoff’s matrix

Answer 8

1. Market penetration
2. Product development
3. Market development
4. Diversification

Question 9

Market penetration

Answer 9

When a business aims to sell existing products into existing markets

Question 10

Advantages of market penetration

Answer 10

1. Uses existing products and services, so the risk is relatively lower compared to new product development
2. Increased market share can result in economies of scale
3. Penetrating the market can improve a company’s competitive advantage

Question 11

Disadvantages of market penetration

Answer 11

1. Aggressive pricing strategies can lead to price wars, damaging long-term profitability
2. Market may become saturated, making further growth more difficult
3. More businesses may enter the market, intensifying competition

Question 12

Product development

Answer 12

When a business aims to sell new products into existing markets

Question 13

Advantages of product development

Answer 13

1. Developing new or improved products can help a business gain a competitive advantage
2. Offering innovative products can help retain existing customers and attract new ones
3. Unique products can help the business differentiate themselves in a crowded market.

Question 14

Disadvantages of product development

Answer 14

1. Product development can be expensive, requiring significant investment in research, design and marketing
2. No guarantee that a new product will be successful and the business may face financial losses
3. Developing a new product often takes time, delaying potential revenue generation

Question 15

Market development

Answer 15

When a business aims to sell existing products into new markets

Question 16

Advantages of market development

Answer 16

1. Allows businesses to expand their customer base and increase sales without creating new products
2. Reduces reliance on a single market, spreading the business risk across multiple markets
3. Brand can become more widely known in different markets, improving overall brand equity

Question 17

Disadvantages of market development

Answer 17

1. Expanding into new markets often requires substantial investment in marketing, distribution and logistics
2. When entering international markets, businesses may face cultural differences, legal regulations and political challenges
3. New market might already be saturated, making it difficult to gain traction or achieve a competitive advantage

Question 18

Diversification

Answer 18

When a business aims to sell new products into new markets

Question 19

Advantages of diversification

Answer 19

1. Operating in different industries or markets, a company can reduce its dependence on a single market or product, spreading its risk
2. Allows businesses to exploit new opportunities and respond to market changes
3. Entering new markets or product areas provides additional revenue streams

Question 20

Disadvantages of diversification

Answer 20

1. Entering a new market or creating a new product involves significant costs for research, development, marketing and production
2. Diversification into unfamiliar markets can create operational hurdles and risk failure due to cultural differences, market dynamics and a lack of experience
3. Expanding into new areas may divert attention from the company’s core operations and could lead to inefficiency

Question 21

Features of Porter’s strategy matrix

Answer 21

1. Low cost
2. Differentiation

Question 22

Competitive advantage

Answer 22

An advantage over competitors gained by offering consumers greater value, either through lower prices or providing greater benefits and service that justifies a higher price

Question 23

Low cost strategy

Answer 23

Objective of becoming the lowest cost operator, this typically involves production on a large scale enabling the business to exploit economies of scale

Question 24

Features of a low cost operator

Answer 24

1. High levels of productivity and efficiency
2. High capacity utilisation
3. Use of bargaining power to negotiate lower prices from suppliers
4. Lean production methods and culture

Question 25

Differentiation strategy

Answer 25

Aims to offer a product that is distinctively different from the competition, with the customer valuing that differentiation

Question 26

Ways for a business to achieve differentiation

Answer 26

1. Superior product quality 2. Branding 3. Wide distribution 4. Sustained promotion

Question 27

Boston matrix

Answer 27

Tool used by business to analyse their product portfolio and make strategic decisions based on market growth and market share

Question 28

Features of the Boston matrix

Answer 28

1. Dog (low market share and low market growth) 2. Question mark (low market share and high market growth 3. Cash cow (high market share and low market growth) 4. Star (high market share and high market growth)

Question 29

Kay's distinctive capabilities

Answer 29

The strengths that give a business a sustainable competitive advantage over rivals

Question 30

Features of Kay's distinctive capabilities

Answer 30

1. Architecture (strong relationships with employers, suppliers and customers) 2. Innovation (ability to develop new products, services or processes ahead of competitors) 3. Reputation (business' brand image and customer perception)

Question 31

SWOT analysis

Answer 31

Helps a business assess its competitive strength and the nature of its external environment

Question 32

Features of SWOT analysis

Answer 32

1. Strengths 2. Weaknesses 3. Opportunities 4. Threats

Question 33

Porter's five forces model

Answer 33

Framework used to analyse the level of competition within an industry, helping businesses assess their competitive position and develop strategies to improve profitability

Question 34

Features of Porter's five forces model

Answer 34

1. Threat of new entrants 2. Threat of substitute products 3. Bargaining power of suppliers 4. Bargaining power of customers 5. Intensity of rivalry within the industry

Question 35

Factors determining the intensity of rivalry within the industry

Answer 35

1. Number of competitors in the market 2. Market size and growth prospects 3. Product differentiation and brand loyalty 4. Barriers to entry and exit